FOREX-Dollar pares gains as investors cash in on boost from Fed's Powell

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* Dollar index touches three-week high
* Sterling tumbles to ten-month low, euro also weaker
* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh
(Recasts, adds yuan, sterling, new analyst comment, updates
prices)
By James Thorne
NEW YORK, July 18 (Reuters) - The dollar retreated from a
three-week high on Wednesday as investors cashed in on gains the
currency made after two days of testimony by U.S. Federal
Reserve Chairman Jerome Powell reinforced a strong economic
outlook.
In congressional testimony on Tuesday and Wednesday Powell
said he believed the United States was on course for years more
of steady growth, and played down the risks to the U.S. economy
of an escalating trade conflict.
Against a basket of six major currencies, the dollar
rose to a three-week high of 95.4 before settling around 95.08,
up 0.2 percent.
The retreat signaled a move by investors to cash in after
"the dollar had a pretty good run," said David Gilmore, partner
at FX Analytics in Westbrook, Connecticut.
The dollar gained 0.43 percent against sterling as
the U.K. currency was dragged to 10-month lows on weak inflation
data and uncertainty over Britain's plans to leave the European
Union.
The Chinese yuan was down 0.41 percent against the
dollar in offshore trading. Earlier in the session, U.S.
President Donald Trump's top economic adviser accused Chinese
President Xi Jinping of holding up a U.S.-China trade deal.
The greenback reserved most of its gains against the
relatively higher-yielding currencies such as the Australian
, Canadian, and New Zealand dollars.
Though concerns the U.S. economy may be nearing a peak as
evident from a flattening yield curve and falling inflation
adjusted-yields, the widening rate differentials between the
U.S. and other major markets also lifted the greenback.
MIND THE GAP
The Fed is expected to hike rates two more times in 2018 to
tackle rising inflationary pressures. Comparatively, the ECB is
expected to start raising rates only in mid-2019.
With U.S. rates continuing to rise and most other major
central banks taking only tentative steps towards monetary
normalization, many analysts expect more dollar upside. RBC is
forecasting a year-end euro/dollar of $1.12.
The dollar rallied to as high as 113.13 against the yen
, its strongest since Jan. 9. It was last at 112.85,
slightly down on the day.
The euro fell 0.16 percent to $1.1640.
========================================================
Currency bid prices at 3:37PM (1937 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar EUR= $1.1640 $1.1659 -0.16% -2.97% +1.1665 +1.1602
Dollar/Yen JPY= 112.8400 112.8500 -0.01% +0.15% +113.1300 +112.7300
Euro/Yen EURJPY= 131.35 131.61 -0.20% -2.83% +131.7700 +130.8900
Dollar/Swiss CHF= 0.9994 1.0000 -0.06% +2.58% +1.0034 +0.9983
Sterling/Dollar GBP= 1.3056 1.3112 -0.43% -3.37% +1.3123 +1.3011
Dollar/Canadian CAD= 1.3172 1.3188 -0.12% +4.73% +1.3259 +1.3169
Australian/Doll AUD= 0.7397 0.7386 +0.15% -5.18% +0.7407 +0.7343
ar
Euro/Swiss EURCHF= 1.1633 1.1661 -0.24% -0.48% +1.1669 +1.1603
Euro/Sterling EURGBP= 0.8915 0.8890 +0.28% +0.36% +0.8931 +0.8875
NZ NZD= 0.6791 0.6782 +0.13% -4.16% +0.6804 +0.6744
Dollar/Dollar
Dollar/Norway NOK= 8.1679 8.1509 +0.21% -0.48% +8.1994 +8.1453
Euro/Norway EURNOK= 9.5089 9.5058 +0.03% -3.45% +9.5405 +9.4918
Dollar/Sweden SEK= 8.8656 8.8388 +0.13% +8.09% +8.8869 +8.8362
Euro/Sweden EURSEK= 10.3215 10.3079 +0.13% +4.90% +10.3378 +10.2940
(Reporting by James Thorne; Additional reporting by Gertrude
Chavez-Dreyfuss in New York)